The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But Paylocity Holding Corporation (NASDAQ:PCTY) has fallen short of that second goal, with a share price rise of 49% over five years, which is below the market return. On a brighter note, more newer shareholders are probably rather content with the 25% share price gain over twelve months.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Paylocity Holding achieved compound earnings per share (EPS) growth of 30% per year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Having said that, the market is still optimistic, given the P/E ratio of 50.85.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Paylocity Holding has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Paylocity Holding's financial health with this free report on its balance sheet.

A Different Perspective

Paylocity Holding shareholders have received returns of 25% over twelve months, which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 8%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand Paylocity Holding better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Paylocity Holding you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.